Finite Element Methods for Option Pricing
نویسندگان
چکیده
The finite element method is well suited to the numerical solution of the partial differential equations arising in finance because they allow for a posteriori error estimates and mesh adaptivity. The method will be described on three simple examples and its advantages will be emphasized.
منابع مشابه
Mathematical analysis and pricing of the European continuous installment call option
In this paper we consider the European continuous installment call option. Then its linear complementarity formulation is given. Writing the resulted problem in variational form, we prove the existence and uniqueness of its weak solution. Finally finite element method is applied to price the European continuous installment call option.
متن کاملNumerical Solutions for Fractional Black-Scholes Option Pricing Equation
In this article we have applied a numerical finite difference method to solve the Black-Scholes European and American option pricing both presented by fractional differential equations in time and asset.
متن کاملA Finite-element Approach for Pricing Swing Options under Stochastic Volatility
Option pricing plays an important role in financial,energy, and commodity markets. The Black-Scholes model is an indispensable framework for the option pricing. This thesis studies the pricing of a swing option under stochastic volatility. A swing option is an American-style contract with multiple exercise rights. As such, it is an optimal multiplestopping time problem. In this dissertation, we...
متن کاملNumerical Solution of Pricing of European Put Option with Stochastic Volatility
In this paper, European option pricing with stochastic volatility forecasted by well known GARCH model is discussed in context of Indian financial market. The data of Reliance Ltd. stockprice from 3/01/2000 to 30/03/2009 is used and resulting partial differential equation is solved byCrank-Nicolson finite difference method for various interest rates and maturity in time. Thesensitivity measures...
متن کاملPricing a Multi-Asset American Option in a Parallel Environment by a Finite Element Method Approach
There is the need for applying numerical methods to problems that cannot be solved analytically and as the spatial dimension of the problem is increased the need for computational recourses increase exponentially, a phenomenon known as the “curse of dimensionality”. In the BlackScholes-Merton framework the American option pricing problem has no closed form solution and a numerical procedure has...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2008